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Are You Forgetting to Save for This Major Expense?

Most Americans neglect to save for their funeral costs. And when that happens, their loved ones suffer.

We hear a lot about the importance of saving for retirement so that we can cover our living costs in our senior years. But how many of us are saving for what happens when retirement comes to an end? The average cost of a funeral today is roughly $10,000, yet a surprising number of Americans don't factor in funeral costs as part of their long-term planning. According to a 2014 survey by the National Funeral Directors Association, only 19% of adults over 40 prearrange their funerals, and of those, only 26% prepay the related expenses. But given the cost of a funeral nowadays, it pays to factor in the expense as part of your retirement planning -- not just for your own sake, but for that of the loved ones you leave behind.

Why the hefty price tag?

It's unfortunate that dying is such an expensive prospect, but like most aspects of life, the cost of a funeral has been climbing steadily over time. Though funeral homes only charge about $6,000 for their services on average, these days, the typical family will wind up spending about $10,000 all in.

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First, let's talk about that $6,000 funeral home expense. If you think that number looks high, you wouldn't be alone, but here's how that figure typically breaks down:

$2,300 casket fee

$1,500 funeral director fee

$600 embalming and body preparation fee

$1,000 ceremony and viewing fee

$600 miscellaneous fees, which may or may not include a hearse, death certificate, and obituary

Of course, traditional funerals don't end at the funeral home. If the service is followed by a burial at a cemetery, you'll spend another $2,000 on that service alone. But wait -- there's more. See, you'd think that $2,000 fee would cover the headstone or grave market, but either option will cost you extra. You'll probably spend $2,000 on a headstone and $1,000 on the more economical grave marker. All in, you're looking at a solid $10,000, or possibly more, for the privilege of being laid to rest peacefully. Ouch.

Come up with a plan

Most Americans don't make funeral arrangements in advance, and the vast majority don't take steps to expressly cover the costs involved. But if you don't take measures to ensure that your funeral is paid for, your loved ones will have a huge financial burden on their hands at a time when they're at their most vulnerable.

Rather than force your family members to cover the cost of your funeral, you can take steps to pay for it yourself. The simplest way to do so is to simply write out a check to your funeral home of choice. Naturally, this option requires you to have $10,000 in cash on hand, which most Americans don't. But if you can't prepay your funeral at once, you can look into setting up a payment plan. Most funeral homes offer multi-year plans that allow you to pay for the cost of your funeral over anywhere from three to 10 years (depending on your age, among other factors). These plans, however, can be expensive, as you'll be charged a premium for paying over time. That said, if you start off on a payment plan and manage to ramp up your savings, you'll generally have the option to pay off your balance early, thus limiting your overall cost.

If you don't want to, or can't, prepay your funeral costs, you can instead arrange for your service to be paid for upon your death. This can be accomplished in a number of ways, one of the easiest being to set up a bank account with a provision to pay your funeral costs upon your death. You might also look into buying a burial insurance policy or arranging for an existing life insurance plan to cover your funeral costs.

No matter what steps you take to make your final arrangements, the key is to be aware of the costs involved and save for them accordingly. Paying for your own funeral is no doubt an uncomfortable thing to do, but on the positive side, you'll get the peace of mind that comes with knowing that your burial is all taken care of. Just as importantly, it'll remove the financial burden from your loved ones and make an already difficult time a bit less harrowing.

Author

Maurie Backman is personal finance writer who's passionate about educating others. Her goal is to make financial topics interesting (because they often aren't) and believes that a healthy dose of sarcasm never hurt anyone. In her somewhat limited spare time, she enjoys playing in nature, watching hockey, and curling up with a good book.